The current sections of Birmingham Inc.’s balance sheets at December 31, 2016 an
ID: 2559395 • Letter: T
Question
The current sections of Birmingham Inc.’s balance sheets at December 31, 2016 and 2017, are presented here. Birmingham’s net income for 2017 was $193,000. The income statement included depreciation expense, $25,000, amortization expense, $10,000, and a gain on disposal of equipment, $7,000. The equipment was sold for $47,000. Birmingham also issued bonds for $60,000.
2017 2016
Current assets
Cash $417,000 $ 99,000
Accounts receivable 120,000 93,000
Inventory 159,000 176,000
Prepaid expenses 29,000 24,000
Total current assets $725,000 $392,000
Current liabilities
Accrued expenses payable $ 17,000 $ 6,000
Accounts payable 88,000 94,000
Total current liabilities $105,000 $100,000
Instructions
Prepare the net cash provided by operating activities section of the company’s statement of cash flows for the year ended December 31, 2017 using the indirect method.
Explanation / Answer
Cash provided by operating activities: Net income 193000 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 25000 Amortization expense 10000 Gain on disposal of equipment -7000 Increase in Accounts receivable -27000 Decrease in Inventory 17000 Increase in Prepaid expenses -5000 Increase in Accrued expenses payable 11000 Decrease in Accounts payable -6000 18000 Net cash provided by operating activities 211000
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